Illusion of skill

I have some of my friends who do trading for living and are doing pretty good. During my initial initial semesters of college, watching my friends make money and travel caused me a FOMO(fear of missing out) made me think that making money by doing trades is easy money than learning how to code and sometimes even thought I should go all in learning how to trade (even watched some YT videos). I lost interest when I read when they put those heavy jargons, which makes one think that they are in the right place to get in the Market. But as time progressed and I read some books (not finance books), it became clear that Individual investors are trading stocks thinking that they would beat the market, and also think that they have the same information as any other big traders out in the market. But studies shows that the individual investors do much worse than the financial institutions. Research shows that most active individual traders had the poorest results, while traders who traded the least earned the highest returns. They believe in the short run “winners” than recent losers, which makes them believe of the skill. Research shows that Professional investors are more selective in responding to the news and does way better in long run. These professional investors labeled as “smart money”. These professional investors beat market year-on-year with persistent, as we can measure in other people like in football, sales people, business etc.. This is a real skill, because where there is a skill the rankings will be more stable. There was a study conducted that majority of individual traders and even some fund managers selecting stocks is more like a throwing a dice. Some individuals do good for few years and large of them lose eventually. This is known as luck, which they believe it is a skill. More important the year to year correlation is also very small. In a highly efficient markets these are nothing more than a blind guess. Real skills are those that remain valuable in any market. This blog reflects purely personal opinions.